Airbnb was expected to be the hottest tech IPO of the year. Instead, the coronavirus pandemic has upended its business.
The Wall Street Journal reported that Airbnb’s recent $US1 billion funding round came with stringent terms. The company is paying more than 10 per cent interest on the new funding. The terms "show the distress the home-sharing company is under due to the coronavirus pandemic," the Journal's Jean Eaglesham and Kirsten Grind write.
Airbnb chief Brian Chesky the company will evolve to address the ways travel may change in the virus’s aftermath.Credit:Bloomberg
The infusion of capital comes as the company's planned IPO may be "in limbo because of stock market volatility and uncertainty caused by the virus," Erin Griffith reports in the New York Times.
Airbnb is one of several travel-related companies suffering especially deeply during the coronavirus pandemic, when many would-be American and international travellers have been told to stay at home. It's also under fire from expected guests who say its refund process is too complicated after they were forced to cancel their plans.
Many customers told CNBC's Salvador Rodriguez the company was making them jump through too many hoops to get their money back. The company asked some guests to provide proof they are restricted from travelling, and others fell outside the original travel-date window for refunds.
"Airbnb needs to rest this problem before it becomes a larger and more expensive problem for them to solve," Henry Harteveldt, a travel industry analyst at Atmosphere Research Group, told Salvador.
It's an ironic position for the startup that launched at the precipice of the 2008 financial crisis that is now facing another economic slowdown at a key moment. And Airbnb is under intense pressure to show it can maintain its position as a Silicon Valley powerhouse.
An additional $US1 billion ($1.6 billion) in the bank could help. Airbnb chief executive Brian Chesky says the money will allow the company to be in a strong strategic position when travel rebounds. He says the company will evolve to address the ways travel may change in the virus's aftermath.
"We'll see a new flexibility in how people live and work, which means they won't have to be tethered to one location," Chesky said in a news release. "And with an emerging interest in travel that's closer to home, our customers will look to nearby places to visit, and for local experiences to take part in."
The company has been aggressively working to preserve its relationships with customers, spokesman Ben Breit told me.
"Our community support team has been working around-the-clock against this global crisis to help both hosts and guests throughout a situation that has been challenging for the entire industry," Breit said. "We activated our Extenuating Circumstances policy to provide guests with full refunds or credit because we believe this is the responsible thing to do given the guidance of governments and health experts."
Airbnb's promise to offer customers who booked between March 14 and April 14 a 100 per cent refund puts it out ahead of other travel booking services' refund policies, such as VRBO. But as the CNBC report underscores, disbursing those refunds has come with significant challenges.
Airbnb is also under pressure to support hosts who have seen a loss of income due to cancellations related to the pandemic.
The company has committed to pay those who will no longer host guests at their properties $US250 million to cover 25 per cent of the fees they would normally charge. The company also lobbied to ensure that hosts would be eligible for unemployment benefits in the recent federal stimulus package.
However, The Washington Post's Tony Romm has reported that states may not be equipped to disburse those benefits to gig economy workers, including Airbnb hosts, immediately.
The Washington Post
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